A curious effect of the U.S. financial crisis

Lisa Howard

Published
4:00 am PDT, Sunday, June 14, 2009

** FILE ** In this February 27, 2008 file photo, euro coins and dollar bills are seen in Frankfurt, central Germany. The U.S. dollar has been declining steadily for six years against other major currencies, undercutting its role as the leading international banking currency. (AP Photo/Michael Probst, File) less

** FILE ** In this February 27, 2008 file photo, euro coins and dollar bills are seen in Frankfurt, central Germany. The U.S. dollar has been declining steadily for six years against other major currencies, ... more

Photo: Michael Probst, AP

Photo: Michael Probst, AP

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** FILE ** In this February 27, 2008 file photo, euro coins and dollar bills are seen in Frankfurt, central Germany. The U.S. dollar has been declining steadily for six years against other major currencies, undercutting its role as the leading international banking currency. (AP Photo/Michael Probst, File) less

** FILE ** In this February 27, 2008 file photo, euro coins and dollar bills are seen in Frankfurt, central Germany. The U.S. dollar has been declining steadily for six years against other major currencies, ... more

Photo: Michael Probst, AP

A curious effect of the U.S. financial crisis

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When Tony Blair appeared on "The Daily Show" last September before he began teaching a class at Yale University, Jon Stewart joked that his timing was perfect for starting a job in America (this was during the dewy new days of the financial crisis), and then asked Blair if he was getting paid in dollars or euros.

Watching the episode in London, I wondered why Stewart thought the former British prime minister would want euros.

Before relocating to London from California, I, like Stewart, assumed that Britain - nay, all of Europe - used euros. Wasn't that one of the points of everyone joining the European Union? Consolidating the currency so, among other advantages, you didn't have to get new money every time you went over a border?

But no. The rainy old United Kingdom kept its money - the pound sterling - and for years enjoyed an enviably favorable pound-to-euro exchange rate, letting average British citizens do things like take long sunny holidays and buy nice sunny second homes on the continent (see British reality-television shows "A Place in the Sun," "A Place in France," "A Place in Spain," etc.).

But England is not the only EU country to keep its currency. The euro is used only by 16 of the 27 member states of the EU.

Other EU member states that have not switched to the euro for a variety of reasons are: Bulgaria, Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Sweden.

In Bulgaria you'll use the lev (73 cents), in the Czech Republic you'll find the koruna (5 cents), Denmark has the krone (19 cents), and in Estonia it's the kroon (9 cents). Latvia's got the lat ($2), and Lithuania the lita (41 cents); in Romania you'll find the new leu (33 cents), and in Sweden it's the krona (13 cents). For travelers who have gotten cozy with the euro ($1.40), the currency outside the eurozone can be mysterious, requiring quick math with unfamiliar bills and coins.

At a cafe in Poland (the zloty, 31 cents), I was embarrassed to realize I had left the waitress essentially a 30-cent tip when I meant to leave the equivalent of $3. When my husband was in Budapest, where 10 forints equal 5 cents, he accidentally tried to withdraw the equivalent of several thousand dollars from an ATM when he meant to withdraw several hundred, which resulted in his debit card being unexpectedly and somewhat inconveniently canceled.

Switzerland is not even in the EU - which makes sense, but hadn't occurred to me because it is smack in the middle of lots of EU countries - and continues to use the Swiss franc (92 cents), a reality I discovered to my dismay when faced with a coin pay toilet after a long train ride involving beverages.

When I traveled as a college student in the 1980s, getting local currency involved bureaux de change with high commissions and terrible exchange rates. Now, visitors mostly get their foreign currency fresh from ATMs. Banks - being banks - charge fees for these foreign withdrawals, but these are generally offset by having a better exchange rate than a bureau de change, and you can save on fees if you avoid making lots of small withdrawals.

During the year we've been in Europe, the dollar's performance against these various European currencies has been quite sad, and then somewhat perplexingly less sad.

When we arrived in London last winter, the exchange rate hovered around $2, meaning everything was priced like it was in dollars, but cost double. A plate of fish and chips costing 8 pounds - that will run you $16. A cappuccino for 3 pounds? Uh-huh, that's right, around $6.

Then came the U.S. financial crisis. As it deepened, widened and gave every indication of sticking like glue, the dollar inexplicably began to rise against the pound. Hadn't the United States started the crisis? Wasn't it our fault? Be that as it may, in mid-October one pound could be bought for $1.75, and in late January it was a very pleasing $1.37. Now it's about $1.60, meaning my cappuccino costs $4.80.

And the dollar hasn't only improved against the pound. Continuing the coffee method of currency exchange, last June a 3-euro cappuccino cost $4.72, but now it's $4.20. The exchange rate has also improved slightly since last year against all those other EU currencies: the lev, koruna, krone, kroon, forint, lat, lita, zloty, new lei, and krona.

It's impossible to predict how long this will continue, but for now, visiting Europe is merely expensive rather than atrocious. It's doubtful there will be a U.S. reality television version of "A Place in France," but if Tony Blair teaches in America again any time soon, he may opt to get his paycheck in dollars.